𝔖 Bobbio Scriptorium
✦   LIBER   ✦

A flexible binomial option pricing model

✍ Scribed by Tian, Yisong ?Sam?

Publisher
John Wiley and Sons
Year
1999
Tongue
English
Weight
829 KB
Volume
19
Category
Article
ISSN
0270-7314

No coin nor oath required. For personal study only.

✦ Synopsis

This article develops a flexible binomial model with a "tilt" parameter that alters the shape and span of the binomial tree. A positive tilt parameter shifts the tree upward while a negative tilt parameter does exactly the opposite. This simple extension of the standard binomial model is shown to converge with any value of the tilt parameter. More importantly, the binomial tree can be recalibrated through the tilt parameter in order to position nodes relative to the strike price or barrier of an option. The rate of convergence is improved as a result.

📜 SIMILAR VOLUMES

Two-State Option Pricing: Binomial Model
Two-State Option Pricing: Binomial Models Revisited
✍ George M. Jabbour; Marat V. Kramin; Stephen D. Young 📂 Article 📅 2001 🏛 John Wiley and Sons 🌐 English ⚖ 112 KB

## Abstract This article revisits the topic of two‐state option pricing. It examines the models developed by Cox, Ross, and Rubinstein (1979), Rendleman and Bartter (1979), and Trigeorgis (1991) and presents two alternative binomial models based on the continuous‐time and discrete‐time geometric Br

Option pricing for the transformed-binom
Option pricing for the transformed-binomial class
✍ António Câmara; San-Lin Chung 📂 Article 📅 2006 🏛 John Wiley and Sons 🌐 English ⚖ 267 KB

This article generalizes the seminal Cox-Ross- binomial option pricing model to all members of the class of transformed-binomial pricing processes. The investigation addresses issues related with asset pricing modeling, hedging strategies, and option pricing. Formulas are derived for (a) replicatin

A new simple square root option pricing
A new simple square root option pricing model
✍ António Câmara; Yaw-huei Wang 📂 Article 📅 2010 🏛 John Wiley and Sons 🌐 English ⚖ 145 KB

## Abstract This study derives a simple square root option pricing model using a general equilibrium approach in an economy where the representative agent has a generalized logarithmic utility function. Our option pricing formulae, like the Black–Scholes model, do not depend on the preference param

Comment on “A new simple square root opt
Comment on “A new simple square root option pricing model”
✍ Hwa-Sung Kim; Jangkoo Kang; Jeongwoo Shin 📂 Article 📅 2011 🏛 John Wiley and Sons 🌐 English ⚖ 77 KB

## Abstract Câmara A. and Wang Y.‐H. (2010) introduce a simple square root option pricing model where the square root of the stock price is governed by a normal distribution. They show that their three‐parameter option pricing model can outperform the Black–Scholes option pricing model. We demonstr

Trinomial or binomial: Accelerating Amer
Trinomial or binomial: Accelerating American put option price on trees
✍ Jiun Hong Chan; Mark Joshi; Robert Tang; Chao Yang 📂 Article 📅 2009 🏛 John Wiley and Sons 🌐 English ⚖ 106 KB

## Abstract We investigate the pricing performance of eight trinomial trees and one binomial tree, which was found to be most effective in an earlier study, under 20 different implementation methodologies for pricing American put options. We conclude that the binomial tree, the Tian third‐order mom